# OGE ENERGY CORP. (OGE) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from OGE ENERGY CORP.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1021635/000095017025022560/oge-20241231.htm
Accession: 0000950170-25-022560
Filing date: 2025-02-19
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/OGE/
All MD&A years: /company/OGE/mda/
Previous year: /company/OGE/mda/fy2023/ (FY 2023)
Next year: /company/OGE/mda/fy2025/ (FY 2025)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following combined discussion is separately filed by OGE Energy and OG&E. However, OG&E does not make any representations as to information related solely to OGE Energy or the subsidiaries of OGE Energy other than itself.

Overview

OGE Energy is a holding company whose primary investment provides electricity in Oklahoma and western Arkansas. OGE Energy's electric company operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to regulation by the OCC, the APSC and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory and is the largest electric company in Oklahoma, with a franchised service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution business.

The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's consolidated financial statements. All intercompany transactions and balances are eliminated in such consolidation.

Recent Developments

OG&E's Regulatory Matters

On November 26, 2024, the OCC issued an interim order approving the settlement agreement in OG&E's most recent rate review. The settlement included a base rate revenue increase of $126.7 million, effective July 1, 2024. OG&E also submitted its final 2024 IRP for Oklahoma and Arkansas in March 2024 and is currently reviewing proposals submitted in this process. These matters, as well as other regulatory matters, are discussed in Note 14 within "Item 8. Financial Statements and Supplementary Data."

Summary of OGE Energy 2024 Operating Results Compared to 2023

OGE Energy's net income was $441.5 million, or $2.19 per diluted share, in 2024 as compared to $416.8 million, or $2.07 per diluted share, in 2023. The increase in net income of $24.7 million, or $0.12 per diluted share, in 2024 as compared to 2023 is further discussed below.

•
An increase in net income at OG&E of $43.5 million, or $0.21 per diluted share of OGE Energy's common stock, was primarily due to higher operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven primarily by load growth and recovery of capital investments, partially offset by higher depreciation and amortization expense driven by additional assets being placed into service, higher income tax expense, higher interest expense driven by borrowings under OG&E's revolving credit agreement and senior notes issuances in August 2024 and April 2023, and lower other income.

•
An increase in net loss of other operations (holding company) of $18.8 million, or $0.09 per diluted share of OGE Energy's common stock, was primarily due to higher interest expense driven by borrowings under OGE Energy's revolving credit agreement and OGE Energy's senior notes issuance in May 2024, as well as lower net other income.

A more detailed discussion regarding the financial performance for the year ended December 31, 2024 as compared to December 31, 2023 can be found under "Results of Operations" below. A discussion of the financial performance for the year ended December 31, 2023 compared to December 31, 2022 for OGE Energy and OG&E can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Registrants' 2023 Form 10-K.

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2025 Outlook

Key assumptions for the 2025 outlook are discussed below.

OGE Energy is projected to earn approximately $447 million to $471 million, or $2.21 to $2.33 per average diluted share, with a midpoint of $459 million, or $2.27 per average diluted share in 2025 and is based off the following assumptions:

•
OGE Energy forecasts earnings for OG&E of $491 million, or $2.43 per average diluted share;

•
OGE Energy forecasts a loss of $32 million for other operations (primarily the holding company), or a loss of $0.16 per average diluted share;

•
OG&E experiences normal weather patterns for the year; OG&E has significant seasonality in its earnings; OG&E typically shows minimal earnings in the first and fourth quarters with a majority of its earnings in the third quarter due to the seasonal nature of air conditioning demand;

•
total retail load growth of approximately 7.5 percent to 9.5 percent;

•
operating expenses of approximately $1.205 billion to $1.217 billion, with operation and maintenance expenses comprising approximately 44 percent of the total;

•
net interest expense of approximately $281 million to $284 million which assumes a $15 million allowance for borrowed funds used during construction reduction to interest expense, and assumes a debt issuance at OG&E of $300 million to $350 million;

•
other income of approximately $16 million including $18 million of allowance for equity funds used during construction;

•
an effective consolidated tax rate of approximately 16.5 percent; and

•
approximately 202.1 million average diluted shares outstanding.

Results of Operations

The following discussion and analysis presents factors that affected the Registrants' results of operations for the years ended December 31, 2024 and 2023 and the Registrants' financial positions at December 31, 2024 and 2023. The following information should be read in conjunction with the financial statements and notes thereto. Known trends and contingencies of a material nature are discussed to the extent considered relevant.

[[GREPCENT_TABLE]]
[["OGE Energy","","Year Ended December 31,"],["(In millions except per share data)","","2024","","","2023"],["Net income","","$","441.5","","","$","416.8"],["Basic average common shares outstanding","","","200.8","","","","200.3"],["Diluted average common shares outstanding","","","201.3","","","","200.9"],["Basic earnings per average common share","","$","2.20","","","$","2.08"],["Diluted earnings per average common share","","$","2.19","","","$","2.07"],["Dividends declared per common share","","$","1.6789","","","$","1.6646"]]
[[/GREPCENT_TABLE]]

Results by Business Segment

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(In millions)","","2024","","","2023"],["Net income:"],["OG&E (Electric Company)","","$","469.9","","","$","426.4"],["Other operations","","","(28.4",")","","","(9.6",")"],["OGE Energy net income","","$","441.5","","","$","416.8"]]
[[/GREPCENT_TABLE]]

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The following discussion of results of operations for OG&E includes intercompany transactions that are eliminated in OGE Energy's consolidated financial statements.

OG&E (Electric Company)

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in millions)","","2024","","","2023"],["Operating revenues","","$","2,985.3","","","$","2,674.3"],["Fuel, purchased power and direct transmission expense","","","1,076.4","","","","911.7"],["Other operation and maintenance","","","514.1","","","","505.0"],["Depreciation and amortization","","","539.5","","","","506.6"],["Taxes other than income","","","109.7","","","","99.4"],["Operating income","","","745.6","","","","651.6"],["Allowance for equity funds used during construction","","","25.5","","","","19.4"],["Other net periodic benefit income (expense)","","","(1.6",")","","","6.5"],["Other income","","","12.5","","","","23.9"],["Other expense","","","4.5","","","","6.3"],["Interest expense","","","214.4","","","","199.9"],["Income tax expense","","","93.2","","","","68.8"],["Net income","","$","469.9","","","$","426.4"],["Operating revenues by classification:"],["Residential","","$","1,148.5","","","$","1,040.4"],["Commercial","","","839.1","","","","688.4"],["Industrial","","","254.1","","","","240.5"],["Oilfield","","","227.7","","","","211.9"],["Public authorities and street light","","","262.0","","","","234.9"],["System sales revenues","","","2,731.4","","","","2,416.1"],["Provision for rate refund and tax refund","","","(3.0",")","","","2.0"],["Integrated market","","","74.5","","","","71.6"],["Transmission","","","152.9","","","","143.0"],["Other","","","29.5","","","","41.6"],["Total operating revenues","","$","2,985.3","","","$","2,674.3"],["MWh sales by classification (In millions)"],["Residential","","","9.8","","","","9.6"],["Commercial","","","10.5","","","","8.5"],["Industrial","","","4.2","","","","4.2"],["Oilfield","","","4.4","","","","4.4"],["Public authorities and street light","","","3.1","","","","3.0"],["System sales","","","32.0","","","","29.7"],["Integrated market","","","0.8","","","","0.8"],["Total sales","","","32.8","","","","30.5"],["Number of customers","","","906,952","","","","896,102"],["Weighted-average cost of energy per kilowatt-hour (In cents)"],["Natural gas","","","2.640","","","","2.976"],["Coal","","","3.083","","","","3.385"],["Total fuel","","","2.637","","","","2.926"],["Total fuel and purchased power","","","3.139","","","","2.837"],["Degree days (A)"],["Heating - Actual","","","2,791","","","","3,092"],["Heating - Normal","","","3,568","","","","3,568"],["Cooling - Actual","","","2,313","","","","2,215"],["Cooling - Normal","","","1,893","","","","1,893"]]
[[/GREPCENT_TABLE]]

(A)
Degree days are calculated as follows: The high and low degrees of a particular day are added together and then averaged. If the calculated average is above 65 degrees, then the difference between the calculated average and 65 is expressed as cooling degree days, with each degree of difference equaling one cooling degree day. If the calculated average is below 65 degrees, then the difference between the calculated average and 65 is expressed as heating degree days, with each degree of difference equaling

33

one heating degree day. The daily calculations are then totaled for the particular reporting period. The calculation of heating and cooling degree normal days is based on a 30-year average and updated every ten years.

OG&E's net income increased $43.5 million, or 10.2 percent, in 2024 as compared to 2023. The following section discusses the primary drivers for the increase in net income in 2024 as compared to 2023.

Operating revenues increased $311.0 million, or 11.6 percent, primarily driven by the below factors.

[[GREPCENT_TABLE]]
[["(In millions)","","$ Change"],["Fuel, purchased power and direct transmission expense (A)","","$","164.7"],["Price variance (B)","","","104.3"],["Non-residential demand and related revenues (C)","","","28.1"],["New customer growth","","","22.0"],["Wholesale transmission revenue","","","8.5"],["Other","","","(0.1",")"],["Quantity impacts (includes weather)","","","(1.6",")"],["Industrial and oilfield sales","","","(3.2",")"],["Guaranteed Flat Bill program (D)","","","(11.7",")"],["Change in operating revenues","","$","311.0"]]
[[/GREPCENT_TABLE]]

(A)
These expenses are generally recoverable from customers through regulatory mechanisms and are offset in Fuel, Purchased Power and Direct Transmission Expense in the statements of income. The primary drivers of the changes in fuel, purchased power and direct transmission expense during the period are further detailed in the table below.

(B)
Increased primarily due to new rates effective July 1, 2024 resulting from the Oklahoma general rate review interim order received in November 2024 and increased recovery through rider mechanisms, such as the Storm Cost Recovery Rider.

(C)
Increased primarily due to initiating new customer service that includes a demand component.

(D)
The Guaranteed Flat Bill program allows qualifying customers the opportunity to purchase their electricity needs at a set monthly price for an entire year which can result in variances when actual fuel and purchased power prices differ from what is included in Guaranteed Flat Bill rates.

Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's fuel, purchased power and direct transmission expense increased $164.7 million, or 18.1 percent, primarily driven by the below factors.

[[GREPCENT_TABLE]]
[["(In millions)","","$ Change"],["Fuel expense (A)","","$","(1.6",")"],["Purchased power costs:"],["Purchases from SPP (B)","","","119.1"],["Capacity (C)","","","29.2"],["Wind","","","5.4"],["Other","","","9.6"],["Transmission expense","","","3.0"],["Change in fuel, purchased power and direct transmission expense","","$","164.7"]]
[[/GREPCENT_TABLE]]

(A)
Decreased primarily due to lower fuel costs related to the generating assets utilized during 2024.

(B)
Increased primarily due to higher market prices and increased MWhs purchased during 2024.

(C)
Increased primarily due to capacity agreements in order for OG&E to meet generation requirements.

Other operation and maintenance expense increased $9.1 million, or 1.8 percent, primarily due to an increase in various costs such as software expense, contract technical and construction services, and payroll and benefits, net of capitalized labor.

Depreciation and amortization expense increased $32.9 million, or 6.5 percent, primarily due to additional assets being placed into service and increased amortization of certain regulatory assets, partially offset by a decrease in depreciation expense due to new depreciation rates effective as of July 1, 2024 resulting from the Oklahoma general rate review interim order received in November 2024.

34

Allowance for equity funds used during construction increased $6.1 million, or 31.4 percent, primarily due to higher construction work in progress balances resulting from increased spending on new generation and information technology projects.

Other net periodic benefit expense changed $8.1 million, primarily due to higher pension expense driven by changes to the level of pension expense included in base rates, effective July 1, 2024, as approved in the Oklahoma general rate review interim order received in November 2024.

Other income decreased $11.4 million, or 47.7 percent, primarily due to the carrying charge for the higher fuel under recovery balance in 2023.

Interest expense increased $14.5 million, or 7.3 percent, primarily due to the $200.0 million in borrowings under OG&E's revolving credit agreement during the second and third quarters of 2024, the $350.0 million senior notes issuance in August 2024, and the $350.0 million senior notes issuance in April 2023. These borrowings were used to support OG&E's growing asset base. The increase in interest expense was partially offset by an increase in allowance for borrowed funds used during construction primarily due to higher construction work in progress balances resulting from increased spending on new generation and information technology projects.

Income tax expense increased $24.4 million, or 35.5 percent, primarily due to higher pretax income and a decrease in state tax credits generated.

Liquidity and Capital Resources

Cash Flows

OGE Energy

[[GREPCENT_TABLE]]
[["Year Ended December 31 (In millions)","","2024","","","2023","","","$ Change","","","% Change"],["Net cash provided from operating activities (A)","","$","812.8","","","$","1,232.3","","","$","(419.5",")","","(34.0)"],["Net cash used in investing activities (B)","","$","(1,161.2",")","","$","(1,272.1",")","","$","110.9","","","(8.7)"],["Net cash provided from (used in) financing activities (C)","","$","348.8","","","$","(48.1",")","","$","396.9","","","*"]]
[[/GREPCENT_TABLE]]

* Change is greater than 100 percent.

(A)
Changed primarily due to decreased cash received from customers, including cash related to fuel recoveries, and increased interest payments from recent debt issuances, partially offset by decreased vendor payments, including payments for fuel.

(B)
Changed primarily due to timing of power supply and power delivery projects.

(C)
Changed primarily due to OGE Energy's $350.0 million senior notes issuance in May 2024 and OG&E's $350.0 million senior notes issuance in August 2024, partially offset by a decrease in commercial paper borrowings.

Working Capital

Working capital is defined as the difference in current assets and current liabilities. OGE Energy's working capital requirements are driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to and the timing of collections from OG&E's customers, the level and timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries. The following discussion addresses changes in OGE Energy's working capital balances at December 31, 2024 compared to December 31, 2023.

Accounts Receivable and Accrued Unbilled Revenues increased $33.7 million, or 12.0 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher usage in 2024 and new rates as approved in the Oklahoma general rate review interim order received in November 2024.

Fuel Clause Under Recoveries increased $112.7 million and Fuel Clause Over Recoveries decreased $11.2 million, or 54.6 percent, primarily due to lower recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.

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Other Current Assets increased $30.1 million, or 51.2 percent, primarily due to an increase in SPP deposits, the SPP transmission formula rate true-up and under-recovered riders. At December 31, 2024, other current assets is primarily comprised of $46.6 million in SPP-related activities and under-recovered riders.

Accounts Payable increased $29.3 million, or 10.6 percent, primarily due to timing of vendor payments and an increase in purchased power payables.

Accrued Taxes increased $11.2 million, or 23.5 percent, primarily resulting from an increase in tax accruals related to ad valorem and income taxes.

Long-Term Debt Due Within One Year increased $32.4 million, due to the reclassification of the Muskogee industrial authority bonds which matured in January 2025.

2024 Capital Requirements, Sources of Financing and Financing Activities

In 2024, OGE Energy's primary sources of capital were cash generated from operations and the proceeds from the issuance of long- and short-term debt. Changes in working capital reflect the seasonal nature of OGE Energy's business, the revenue lag between billing and collection from customers and fuel inventories. See "Working Capital" for a discussion of significant changes in net working capital requirements as it pertains to operating cash flow and liquidity.

Future Material Cash Requirements

OGE Energy's primary material cash requirements are related to acquiring or constructing new facilities and replacing or expanding existing facilities at OG&E. Other working capital requirements are expected to be primarily related to maturing debt, operating lease obligations, fuel clause under recoveries and other general corporate purposes. Further, working capital requirements can be seasonal. OGE Energy generally meets its cash needs through a combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings and commercial paper) and permanent financings. We believe our cash flows from operations, existing borrowing capacity, and access to debt and equity capital markets as needed, should be sufficient to satisfy our material cash requirements over the short-term and long-term.

Capital Expenditures

The following table presents OGE Energy's estimates of capital expenditures for the years 2025 through 2029. These capital investments are customer-focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base.

[[GREPCENT_TABLE]]
[["(In millions)","","2025","","","2026 (A)","","","2027 (A)","","","2028 (A)","","","2029 (A)","","","Total"],["Transmission","","$","110","","","$","195","","","$","225","","","$","240","","","$","240","","","$","1,010"],["Oklahoma distribution","","","495","","","","665","","","","705","","","","725","","","","775","","","","3,365"],["Arkansas distribution","","","25","","","","25","","","","25","","","","25","","","","25","","","","125"],["Generation reliability","","","175","","","","155","","","","160","","","","165","","","","165","","","","820"],["Generation capacity projects","","","210","","","","35","","","","\u2014","","","","\u2014","","","","\u2014","","","","245"],["Technology, fleet & facilities","","","135","","","","125","","","","135","","","","145","","","","145","","","","685"],["Total","","$","1,150","","","$","1,200","","","$","1,250","","","$","1,300","","","$","1,350","","","$","6,250"]]
[[/GREPCENT_TABLE]]

(A)
OG&E expects to continually evaluate the capital prioritization for transmission, distribution, technology, and generation investments based on the evolving capacity, reliability, and economic growth needs of the electrical power system.

36

Additional capital expenditures beyond those identified in the table above, including additional incremental growth opportunities, will be evaluated based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits. In May 2024, OG&E issued requests for proposals for resources to meet the capacity needs identified in its 2024 IRP and is currently reviewing the proposals submitted in the process. OG&E intends to file for approval of additional generation capacity investments and would expect to update its capital plan based on final orders received by state regulators. The annual level of investments in the transmission and distribution system could vary depending on the amount and timing of incremental generation capacity investments.

Contractual Obligations

The following table presents OGE Energy's total contractual obligations for the next five years at December 31, 2024. For further detail of OGE Energy's contractual obligations, which include operating leases, long-term debt and purchase obligations and commitments (including information for maturities beyond the next five years), see Notes 4, 9 and 13, respectively, within "Item 8. Financial Statements and Supplementary Data."

[[GREPCENT_TABLE]]
[["(In millions)","","2025","","","2026","","","2027","","","2028","","","2029","","","Total"],["Total contractual obligations","","$","443.2","","","$","261.6","","","$","436.9","","","$","629.4","","","$","478.7","","","$","2,249.8"],["Amounts recoverable through fuel adjustment clause and other regulatory mechanisms (A)","","","(230.4",")","","","(181.0",")","","","(175.2",")","","","(123.3",")","","","(122.5",")","","","(832.4",")"],["Total contractual obligations, net","","$","212.8","","","$","80.6","","","$","261.7","","","$","506.1","","","$","356.2","","","$","1,417.4"]]
[[/GREPCENT_TABLE]]

(A)
Includes expected recoveries of costs incurred for OG&E's railcar operating lease obligations, OG&E's minimum fuel purchase commitments, OG&E's expected wind purchase commitments and OG&E's capacity agreements.

The actual cost of fuel used in electric generation (which includes the operating lease obligations for OG&E's railcar leases shown in Note 4 within "Item 8. Financial Statements and Supplementary Data") and certain purchased power costs are passed on to OG&E's customers through fuel adjustment clauses and other regulatory mechanisms. Accordingly, while the cost of fuel related to operating leases and the vast majority of minimum fuel purchase commitments of OG&E noted in Notes 4 and 13, respectively, within "Item 8. Financial Statements and Supplementary Data" may increase capital requirements, such costs are generally recoverable through fuel adjustment clauses and have little, if any, impact on net capital requirements and future contractual obligations. OG&E's fuel adjustment clauses are subject to periodic review by the OCC and the APSC. Otherwise, as discussed above, OGE Energy expects to meet these cash requirement needs through cash generated from operations, short-term borrowings and permanent financings.

Pension and Postretirement Benefit Plans

At December 31, 2024, 22.6 percent of the Pension Plan investments were in listed common stocks with the balance primarily invested in corporate fixed income and other securities, U.S. Treasury notes and bonds and mutual funds, as presented in Note 11 within "Item 8. Financial Statements and Supplementary Data." During 2024, the actual return on the Pension Plan was $11.8 million, compared to an expected return on plan assets of $16.5 million. During the same time, corporate bond yields, which are used in determining the discount rate for future pension obligations, increased. Funding levels are dependent on returns on plan assets and future discount rates. OGE Energy made a contribution to its Pension Plan of $10.0 million in 2024 and did not make a contribution to its Pension Plan in 2023. OGE Energy expects to contribute $10.0 million to the Pension Plan in 2025, of which $5.0 million was contributed in January 2025. OGE Energy could be required to make additional contributions if the value of its pension trust and postretirement benefit plan trust assets are adversely impacted by a major market disruption in the future.

The following table presents the status of OGE Energy's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans at December 31, 2024 and 2023. These amounts have been recorded in Accrued Benefit Obligations with the offset in Accumulated Other Comprehensive Loss (except OG&E's portion, which is recorded as a regulatory asset as discussed in Note 1 within "Item 8. Financial Statements and Supplementary Data") in the balance sheets. The amounts in Accumulated Other Comprehensive Loss and those recorded as a regulatory asset represent a net periodic benefit cost to be recognized in the statements of income in future periods.

37

[[GREPCENT_TABLE]]
[["","","Pension Plan","","","Restoration of Retirement Income Plan","","","Postretirement Benefit Plans"],["December 31 (In millions)","","2024","","","2023","","","2024","","","2023","","","2024","","","2023"],["Benefit obligations","","$","303.1","","","$","303.7","","","$","7.0","","","$","5.5","","","$","98.1","","","$","103.3"],["Fair value of plan assets","","","246.9","","","","243.7","","","","\u2014","","","","\u2014","","","","30.0","","","","32.7"],["Funded status at end of year","","$","(56.2",")","","$","(60.0",")","","$","(7.0",")","","$","(5.5",")","","$","(68.1",")","","$","(70.6",")"]]
[[/GREPCENT_TABLE]]

Common Stock Dividends

OGE Energy's dividend policy is reviewed by the Board of Directors at least annually and is based on numerous factors, including management's estimation of the long-term earnings power of its businesses. In 2024, the Board of Directors reviewed a recommendation from management of an increase in the quarterly dividend to $0.42125 per share from $0.41820 per share and subsequently approved the recommendation to become effective with the dividend payment in October 2024.

Financing Activities and Future Sources of Financing

Management expects that cash generated from operations, proceeds from the issuance of long- and short-term debt, proceeds from the sales of common stock to the public through OGE Energy's Automatic Dividend Reinvestment and Stock Purchase Plan, or other offerings will be adequate over the next three years to meet anticipated cash needs and to fund future growth opportunities. OGE Energy utilizes short-term borrowings (through a combination of bank borrowings and commercial paper) to satisfy temporary working capital needs and as an interim source of financing capital expenditures until permanent financing is arranged.

Short-Term Debt and Credit Facilities

OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements.

OGE Energy has unsecured five-year revolving credit facilities totaling $1.1 billion ($550.0 million for OGE Energy and $550.0 million for OG&E), which can also be used as letter of credit facilities. OGE Energy also has a $120.0 million floating rate unsecured three-year credit agreement, of which $60.0 million is considered a revolving loan. The following table presents information about OGE Energy's revolving credit agreements as of December 31, 2024.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","December 31, 2024"],["Balance of outstanding supporting letters of credit","","$","0.4"],["Weighted-average interest rate of outstanding supporting letters of credit","","","1.20","%"],["Net available liquidity under revolving credit agreements, commercial paper borrowings and letters of credit","","$","690.3"],["Balance of cash and cash equivalents","","$","0.6"]]
[[/GREPCENT_TABLE]]

The following table presents information about OGE Energy's total short-term debt activity for the year ended December 31, 2024.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Year Ended December 31, 2024"],["Average balance of short-term debt","","$","444.8"],["Weighted-average interest rate of average balance of short-term debt","","","5.52","%"],["Maximum month-end balance of short-term debt","","$","755.7"]]
[[/GREPCENT_TABLE]]

OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2025 and ending December 31, 2026.

Long-Term Debt

On May 9, 2024, OGE Energy issued $350.0 million of 5.45 percent senior notes due May 15, 2029. The proceeds from this issuance were added to OGE Energy's general funds to be used for general corporate purposes and to repay short-term debt.

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On August 15, 2024, OG&E issued $350.0 million of 5.60 percent senior notes due April 1, 2053, bringing the aggregate total principal amount of this series of senior notes to $700.0 million. The proceeds from this issuance were added to OG&E's general funds to be used for repayment of short-term debt and borrowings under OG&E's revolving credit agreement, and to fund OG&E's capital investment program and working capital needs.

In 2025, OG&E expects to issue $300 million to $350 million in long-term debt to help fund general operating needs.

Refinance of Industrial Authority Bonds

On October 2, 2024, OG&E caused the refinancing of its Garfield industrial authority bonds, series due January 1, 2025. The $47.0 million in bonds are now due October 1, 2039, and will continue to be remarketed on a weekly basis.

Security Ratings

[[GREPCENT_TABLE]]
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Access to reasonably priced capital is dependent in part on credit and security ratings. Generally, lower ratings lead to higher financing costs. Pricing grids associated with OGE Energy's credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of any future downgrade could include an increase in the costs of OGE Energy's short-term borrowings, but a reduction in OGE Energy's credit ratings would not result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below investment grade, would require OGE Energy to post collateral or letters of credit.

A security rating is not a recommendation to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the credit rating agency, and each rating should be evaluated independently of any other rating.

Future financing requirements may be dependent, to varying degrees, upon numerous factors such as general economic conditions, abnormal weather, load growth, commodity prices, acquisitions of other businesses and/or development of projects, actions by rating agencies, inflation, changes in environmental laws or regulations, rate increases or decreases allowed by regulatory agencies, new legislation, and market entry of competing electric power generators.

Common Stock

OGE Energy expects to issue between $15 million to $25 million of common stock from its Automatic Dividend Reinvestment and Stock Purchase Plan in 2025. See Note 8 within "Item 8. Financial Statements and Supplementary Data" for a discussion of OGE Energy's common stock activity.

Critical Accounting Policies and Estimates

The financial statements and notes thereto contain information that is pertinent to management's discussion and analysis. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Changes to these assumptions and estimates could have a material effect on the Registrants' financial statements. However, the Registrants believe they have taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to the Registrants that could result if actual results vary from the assumptions and estimates.

In management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan assumptions, income taxes, contingency reserves, and regulatory assets and liabilities. The selection, application

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and disclosure of the following critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors. The Registrants discuss their significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates, in Note 1 within "Item 8. Financial Statements and Supplementary Data."

Pension and Postretirement Plan Assumptions

OGE Energy has a Pension Plan that covers certain employees, including OG&E's employees, hired before December 1, 2009. Effective December 1, 2009, OGE Energy's Pension Plan is no longer being offered to employees hired on or after December 1, 2009. OGE Energy also has defined benefit postretirement plans that cover certain employees, including OG&E's employees hired prior to February 1, 2020. Pension and other postretirement plan expenses and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan assets, assumed discount rates, and the level of funding. Actual changes in the fair market value of plan assets and differences between the actual return on plan assets and the expected return on plan assets could have a material effect on the amount of pension expense ultimately recognized. The Pension Plan rate assumptions are shown in Note 11 within "Item 8. Financial Statements and Supplementary Data." The assumed return on plan assets is based on management's expectation of the long-term return on the plan assets portfolio. The discount rate used to compute the present value of plan liabilities is based generally on rates of high-grade corporate bonds with maturities similar to the average period over which benefits will be paid. Funding levels are dependent on returns on plan assets and future discount rates. Higher returns on plan assets and an increase in discount rates will reduce funding requirements to the Pension Plan.

The following table presents the sensitivity of the Pension Plan funded status to these variables.

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Income Taxes

The Registrants use the asset and liability method of accounting for income taxes. Under this method, a deferred tax asset or liability is recognized for the estimated future tax effects attributable to temporary differences between the financial statement basis and the tax basis of assets and liabilities, as well as tax credit carry forwards and net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period of the change.

The application of income tax law is complex. Laws and regulations in this area are voluminous and often ambiguous. Interpretations and guidance surrounding income tax laws and regulations change over time. Accordingly, it is necessary to make judgments regarding income tax exposure. As a result, changes in these judgments can materially affect amounts the Registrants recognized in their financial statements. Tax positions taken by the Registrants on their income tax returns that are recognized in the financial statements must satisfy a more likely than not recognition threshold, assuming that the position will be examined by taxing authorities with full knowledge of all relevant information.

Contingency Reserves

In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the financial statements.

Regulatory Assets and Liabilities

OG&E, as a regulated electric company, is subject to accounting principles for certain types of rate-regulated activities, which provide that certain incurred costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense

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can be deferred as regulatory liabilities, based on the expected flowback to customers in future rates. Management's expected recovery of deferred costs and flowback of deferred credits generally results from specific decisions by regulators granting such ratemaking treatment.

OG&E records certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is probable that the costs or obligations will be included in amounts allowable for recovery or refund in future rates. Management continuously monitors the future recoverability of regulatory assets. When in management's judgment future recovery becomes impaired, the amount of the regulatory asset is adjusted, as appropriate.

Accounting Pronouncements

See Note 2 within "Item 8. Financial Statements and Supplementary Data" for further discussion of recently adopted accounting standards and recently issued accounting standards that are not yet effective that could have a material impact on the Registrants' financial position, results of operations or cash flows upon adoption.

Commitments and Contingencies

In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. At the present time, based on currently available information, the Registrants believe that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to their financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows. See Notes 13 and 14 within "Item 8. Financial Statements and Supplementary Data" and "Item 3. Legal Proceedings" for further discussion of the Registrants' commitments and contingencies.

Environmental Laws and Regulations

The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection. These laws and regulations can change, restrict or otherwise impact the Registrants' business activities in many ways, including the handling or disposal of waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of the Registrants' operations are in substantial compliance with current federal, state and local environmental standards.

Changes in presidential administrations can result in uncertainty regarding policy or initiatives relating to activities that may affect the environment. The Registrants cannot assure that future events, such as changes in existing laws, the promulgation of new laws or regulations, or the development or discovery of new facts or conditions will not cause them to incur significant costs.

Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.

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Air

OG&E's operations are subject to the Federal Clean Air Act of 1970, as amended, and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including electric generating units and also impose various monitoring and reporting requirements. Such laws and regulations may require that OG&E obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air emissions, obtain and strictly comply with air permits containing various emissions and operational limitations or install emission control equipment. OG&E likely will be required to incur certain capital expenditures in the future for air pollution control equipment and technology in connection with obtaining and maintaining operating permits and approvals for air emissions.

Cross State Air Pollution Rule

The EPA revised the NAAQS for ozone in 2015. Although Oklahoma complies with the revised standard, the Federal Clean Air Act of 1970, as amended, requires states to submit to the EPA for approval a SIP to prohibit in-state sources from contributing significantly to nonattainment of the NAAQS in another state. On October 28, 2018, Oklahoma submitted its SIP to the EPA related to these "Good Neighbor" requirements. On January 31, 2023, the EPA disapproved the SIPs of 19 states, including Oklahoma. On March 2, 2023, the Oklahoma Attorney General and the ODEQ jointly filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On March 16, 2023, OG&E filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On June 6, 2023, OG&E, together with the Oklahoma Attorney General and other parties, jointly filed a motion with the Tenth Circuit requesting a stay of the EPA’s disapproval of the Oklahoma SIP; the stay was granted on July 27, 2023. On February 27, 2024, the Tenth Circuit issued a decision to transfer venue to the U.S. Court of Appeals for the District of Columbia and vacated oral argument originally scheduled for March 21, 2024 but did not vacate the stay it granted. On March 28, 2024, the Oklahoma Attorney General, on behalf of the parties noted above, petitioned the U.S. Supreme Court to review the Tenth Circuit’s decision to transfer the SIP disapproval cases to the D.C. Circuit, and on April 24, 2024, the D.C. Circuit ordered that the cases be held in abeyance pending action by the U.S. Supreme Court. On October 21, 2024, the U.S. Supreme Court granted review of the Tenth Circuit’s venue decision. On November 6, 2024, the D.C. Circuit ordered that the cases remain in abeyance pending the U.S. Supreme Court’s review of the Clean Air Act’s venue provision. Briefing is ongoing at the U.S. Supreme Court. On January 24, 2025, the EPA asked the U.S. Supreme Court to hold the briefing schedule in abeyance because the EPA’s acting administrator has determined that the agency should reassess the basis for and soundness of the underlying disapproval action. However, on February 6, 2025, the U.S. Supreme Court denied the EPA's motion to hold the case in abeyance. Oral argument at the U.S. Supreme Court is set to be scheduled for March 2025. The timing of a U.S. Supreme Court decision or further action at the D.C. Circuit is unknown.

In a separate but related matter, on April 6, 2022, the EPA also published a proposed FIP related to the "Good Neighbor" requirements intended to reduce interstate NOX emissions contributions. OG&E filed comments to the proposed FIP with the EPA on June 21, 2022. On June 5, 2023, the EPA published a final FIP for 23 states, including Oklahoma. The issuance of the FIP resulted from the EPA's aforementioned SIP disapprovals. Among other changes, the EPA finalized a revision of the current Oklahoma NOX emissions budget for electric generating units, including OG&E's units, which began in 2023. Under the terms of the FIP, the emissions budget will decline over time based on the level of reductions that the EPA has determined is achievable through particular emissions controls. OG&E’s analysis indicates that Oklahoma’s state budget for 2026 will be reduced by 34.5 percent from 2023 levels and that for 2027 it will be reduced by 50 percent from 2021 levels. In October 2023, several state and industry petitioners filed emergency applications for a stay of the EPA’s Good Neighbor FIP in the U.S. Supreme Court. On June 27, 2024, the U.S. Supreme Court granted the emergency applications and stayed the EPA's final FIP, pending review of petitioners' challenges in the D.C. Circuit Court. On February 6, 2025, the EPA requested that the D.C. Circuit Court not issue an opinion and place the case in abeyance for 60 days in order for the new EPA leadership to determine how they want to proceed in the litigation.

In light of the issuance of the FIP, OG&E has been evaluating various control strategies to reduce emissions at its generating units, which can range from some combination of purchase of emission allowances, installation of selective catalytic reduction controls, conversion of coal-fired units to gas-fired units or retirement and replacement of capacity. OG&E submitted its final 2024 IRP to the OCC and APSC on March 29, 2024. The IRP evaluates various potential compliance options related to the EPA's Good Neighbor FIP. Due to the uncertainty relating to the disapproval of the SIP and implementation of the FIP, OG&E cannot determine the cost to comply with certainty, as such costs are dependent upon the timing and outcome of the litigation discussed above, the particular control strategies ultimately selected for each unit, the terms and timing of regulatory approvals required from the OCC and APSC and the time period necessary to complete the projects. However, OG&E preliminarily estimates that the cost of compliance with the FIP as issued could be approximately $2.4 billion to $2.8 billion in total, including $100 million to $300 million over the 12- to 18-month

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period following effectiveness of the FIP. OG&E expects that it would seek recovery of any necessary environmental expenditures to address state and federally mandated environmental upgrades, but there is no guarantee that all of such expenditures will be approved for recovery or will be approved for recovery on a timely basis.

New Source Performance Standards

On December 13, 2024, the EPA published in the Federal Register a proposed rule that would revise the new source performance standards regulating NOx and SO2 emissions from new, modified, and reconstructed stationary combustion turbines. The EPA is proposing more stringent NOx emissions standards and to retain the existing SO2 standards. The deadline to submit comments on the Proposed Rule is March 13, 2025. It is unknown what potential material impacts, if any, there will be from any final action by the EPA.

Particulate Matter NAAQS

On February 7, 2024, the EPA issued a final rule resulting from its reconsideration of the primary (health-based) and secondary (welfare-based) NAAQS for PM, which were set in 2013 and which the EPA declined to revise in 2020. The final rule lowers the primary annual PM2.5 NAAQS from 12.0 µg/m3 to 9.0 µg/m3 and retains the other PM standards at their current levels, including the 24-hour PM2.5 NAAQS. The EPA will determine which areas of the country meet the standards, such as making initial attainment and nonattainment designations, no later than two years after new standards are issued. States must develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations.

The final rule was published in the Federal Register on March 6, 2024. Litigation on the final rule is proceeding in the D.C. Circuit. A coalition of 24 states, including Oklahoma, filed challenges to the final rule, and a separate coalition of states and other stakeholders filed to intervene in these challenges on behalf of the EPA. A coalition of 22 state governors separately requested the EPA to pause implementation of the final rule.

The revised NAAQS could impact regional air quality goals and emission limits for emission sources; however, it is unknown at this time what, if any, potential material impacts to OG&E individual operating permit emission limits will result from the EPA actions.

Regional Haze

In July 2020, the ODEQ notified OG&E that the Horseshoe Lake generating units would be included in Oklahoma's second Regional Haze implementation period evaluation of visibility impairment impacts to the Wichita Mountains. OG&E submitted an analysis of all potential control measures for NOx on these units to the ODEQ. The ODEQ submitted a revised SIP to the EPA on August 12, 2022. On June 28, 2024, the EPA entered into a consent decree which requires the EPA to propose action on the Oklahoma SIP no later than December 31, 2025 and take final action no later than December 31, 2026. It is unknown at this time what the outcome, or any potential material impacts, if any, will be from the evaluations by OG&E, the ODEQ and the EPA.

Mercury and Air Toxics Standards

On April 25, 2024, the EPA released the final revised Mercury and Air Toxics Standards regulation with a compliance date in May 2027. On May 8, 2024, a coalition of states, including Oklahoma, filed a challenge to the final rule in the D.C. Circuit Court and on June 7, 2024 filed a motion to stay the final rule which was ultimately denied. Subsequently, this coalition of states filed an emergency stay application with the U.S. Supreme Court on August 16, 2024. The U.S. Supreme Court denied the applications on October 4, 2024. It is unknown what potential material impacts, if any, will be from the final action by the EPA.

Greenhouse Gas

OG&E monitors possible changes in legal standards for emissions of greenhouse gases, including CO2, sulfur hexafluoride and methane. As discussed below, recently promulgated federal rules under the Biden Administration will potentially impose requirements on fossil fuel assets, but the Trump Administration is evaluating energy-related regulations impacting reliability and affordability. If these recently promulgated rules are implemented and enforced as currently written or if legislation or regulations are passed at the federal or state levels in the future requiring mandatory reductions of CO2 and other greenhouse gases at OG&E's facilities, this could result in significant additional compliance costs that would affect OG&E's future financial position, results of operations and cash flows if such costs are not recovered through regulated rates.

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On May 9, 2024, the EPA published its final rule addressing emission guidelines under Section 111(d) for existing fossil fuel fired steam units, including both coal-fired and oil/gas-fired steam units, and revising performance standards under Section 111(b) for new gas turbines. Unlike the proposed rules, the final rules do not address existing simple and combined-cycle combustion turbine units which are now addressed in a separate rulemaking with proposed rules expected later in the first quarter of 2025.

Under Section 111(d), existing coal units will be required to use carbon capture covering 90 percent of emissions by 2032 if they plan to operate beyond 2039. If the coal units plan to operate until 2039, they must co-fire with natural gas at 40 percent by 2030. Coal plants that commit to retire by 2032 are exempt and may continue to operate as is. Subject to litigation, compliance decisions must be submitted to the state for inclusion in the SIP, which is due to the EPA in May 2026.

The EPA also addressed existing natural gas-fired boilers under Section 111(d) with emissions rates based on a unit’s annual capacity factor. OG&E’s existing gas boilers currently meet the new requirements and therefore no additional compliance steps beyond reporting are expected.

Under Section 111(b), the EPA finalized standards for new natural gas-fired turbines commencing construction after May 23, 2023, using capacity factor thresholds to differentiate among new units establishing three subcategories: baseload, intermediate load, and low load. All three categories are subject to efficiency standards. Baseload units, those with a capacity factor greater than 40 percent, are also subject to a phase two requirement based on 90 percent capture of CO2 with a compliance deadline of January 1, 2032.

Significant litigation is underway, including a challenge by OG&E and a multi-state challenge joined by Oklahoma. Briefing in this challenge has begun in the D.C. Circuit.

On May 24, 2024, several groups of petitioners, including OG&E, which joined with Edison Electric Institute and three other declarants, filed motions for stay of the rule at the D.C. Circuit. The Court consolidated these motions and on July 19, 2024, denied all stay requests. On July 29, 2024, OG&E, jointly with Edison Electric Institute and another applicant, appealed the stay denial to the U.S. Supreme Court. Other industry and state petitioners, including Oklahoma, appealed the D.C. Circuit's stay denial to the U.S. Supreme Court as well. On October 16, 2024, the U.S. Supreme Court denied the stay request. Petitioners can seek another stay from the U.S. Supreme Court in the event the D.C. Circuit rules against them. Oral argument was held before the D.C. Circuit on December 6, 2024; the timing of a decision is not known at this time. However, on February 5, 2025, the EPA requested that the D.C. Court not issue an opinion and place the case in abeyance for 60 days in order for the new EPA leadership to determine how they want to proceed in the litigation. It is unknown what the outcome of the litigation will be, or potential material impacts, if any, it will have on these new emission standards and guidelines, but the Registrants continue to plan for compliance and, if the new emission standards and guidelines are implemented as adopted, such compliance costs would be material.

As a member of the SPP Integrated Marketplace, OG&E customers have access to clean energy resources while maintaining reliability and affordability. With respect to its calendar year 2024 direct emissions, compared to 2005 levels, OG&E has reduced CO2 emissions by approximately 60 percent, emissions of ozone-forming NOx have been reduced by approximately 80 percent, and emissions of SO2 have been reduced by approximately 95 percent. Direct emission reductions are due to factors such as OG&E’s conversion of certain coal units to natural gas units, its participation in the SPP integrated market, and its active engagement with customers in OG&E’s SmartHours and Load Reduction Programs which helps reduce the amount of generation required to serve peak demand. OG&E is also planning to deploy more renewable energy sources that do not emit greenhouse gases. OG&E has leveraged its geographic position to develop and access renewable energy resources and completed transmission investments to deliver the renewable energy.

Endangered Species

Certain federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are located in an area in which OG&E conducts operations, or if additional species in those areas become subject to protection, OG&E's operations and development projects, particularly transmission, wind or solar projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.

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In September 2022, the USFWS published a proposal to list the Tricolored Bat as endangered under the Endangered Species Act. According to the proposal, the current known range of the Tricolored Bat extends to 36 states, including Oklahoma and Arkansas. A listing decision was expected by September 2024, however, to date no listing decision has been issued. OG&E is closely monitoring this issue due to possible future impacts; however, it is unknown at this time what, if any, material impacts will result from the USFWS action.

Waste

OG&E's operations generate wastes that are subject to the Federal Resource Conservation and Recovery Act of 1976 as well as comparable state laws which impose detailed requirements for the handling, storage, treatment and disposal of waste.

During 2024, approximately 95 percent of the ash from OG&E's River Valley, Muskogee and Sooner facilities was recovered and reused off-site in various ways, including soil stabilization, landfill cover, road base construction and cement and concrete production. Reusing fly ash reduces the need to manufacture cement resulting in reductions in greenhouse gas emissions from cement and concrete production. Based on estimates from the American Coal Ash Association, OG&E fly ash reuse helped avoid over approximately 4 million tons of CO2 emissions in the last 16 years.

OG&E has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and recycling efforts. In 2024, OG&E obtained refunds of $2.5 million from the recycling of scrap metal, salvaged transformers and used transformer oil. This figure does not include the additional savings gained through the reduction and/or avoidance of disposal costs and the reduction in material purchases due to the reuse of existing materials. Similar savings are anticipated in future years.

Water

OG&E's operations are subject to the Federal Clean Water Act and comparable state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the discharge of pollutants into state and federal waters.

In 2015, the EPA issued a final rule addressing the effluent limitation guidelines for power plants under the Federal Clean Water Act. The final rule establishes technology- and performance-based standards that may apply to discharges of six waste streams including bottom ash transport water. In April 2017, the EPA granted a Petition for Reconsideration of the 2015 Rule. On April 25, 2024, the EPA released the final supplemental effluent limitations guidelines rule. OG&E has completed installation of dry bottom ash handling technology at an affected facility and is evaluating options at another affected facility to comply with the final rule by the December 31, 2029 compliance date.

Since the purchase of the Redbud facility in 2008, OG&E made investments in the infrastructure that have led to OG&E's average use of approximately 2.4 billion gallons per year of treated municipal effluent for cooling water at Redbud and McClain. This use of treated municipal effluent offsets the need for fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.

Site Remediation

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regard to the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Because OG&E utilizes various products and generates wastes that are considered hazardous substances for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, OG&E could be subject to liability for the costs of cleaning up and restoring sites where those substances have been released to the environment. At this time, it is not anticipated that any associated liability will cause a significant impact to OG&E.